Josie Wragg interviewed: “Slough is not in denial”
Slough BC CEO Josie Wragg admits having to issue a Section 114 notice, as her board did on July 2, is “probably one of the worst things you can do in the world. world of local governments ”.
With a deficit of £ 56million in 2021 and an additional £ 40million expected this year, even after a £ 15.2million funding executive loan from the government, the challenges facing the board need not be not be underestimated.
The full extent of the crisis it faces has been apparent since its budget was set in February, with Slough now forecasting an ‘unmanageable gap’ of £ 159million by March 2025.
Ms Wragg told LGC: “You can probably guess from this the kinds of conversations we are having with the Department of Housing, Communities and Local Government right now. “
She says that even if Slough had understood the extent of his financial weaknesses months or years ago rather than recent weeks, “the situation would have been the same – the depth of what we have exposed is quite considerable.”
She acknowledges that the board will not emerge from its current predicament without another capitalization loan, but even the current request of £ 15.2million depends on a review by an MHCLG team next week and a another from the Chartered Institute of Public Finance & Accountancy. .
“We are managed within an inch of our lives at the moment – and this will continue for several months, if not years to come,” Ms. Wragg said.
“Slough is not denying this – we recognize that this is a very serious situation. But we are not afraid of criticism. We see it as learning to put things in place for the future.
Ms Wragg remembers how different things were when she joined Slough in 2018 from Wokingham BC where she was Director of Communities and Customer Services. She arrived “full of hopes of truly transforming the council and the city.”
But recent events have “certainly held back some of these ambitions”. Ms Wragg acknowledges that her work is now mainly about “crisis management”.
“The mandate has changed dramatically, and personally, of course, it’s a challenge. But as CEOs in an ever-changing landscape, that’s what we need to do and do nowadays.
Regeneration plans change course
One of the main goals of Ms Wragg’s team was the large-scale regeneration of the crumbling town center of Slough, which explains much of the £ 760million debt she has accumulated.
To access a capitalization loan, Slough must agree to sell part of its assets and reconsider the envisaged commercial efforts. But Ms Wragg is convinced that this should not harm regeneration plans too much.
As Slough is currently reviewing its programs and faces pressure to make cuts, Wragg says officers are “determined that while we need to act quickly, we are not going to act instinctively.” The “likely outcome” is that Slough will become a “facilitator” in regeneration projects rather than participating in joint ventures.
“We’re exploring ways to achieve similar results, without always being the ones taking the financial risk,” says Wragg.
While some might assume it’s a tough time for Slough to try to persuade the private sector to take more financial risk, Ms Wragg is optimistic.
“There hasn’t been any pullback from the market that we can see – if anything, people are tripping over themselves to be associated with Slough, despite this real bombshell hitting us.
“Things like connectivity to London and Heathrow as well as an interventionist approach to the council have all meant that in fact the market is buoyant and the time for the council to step down is very appropriate.”
Too little allocated to repay loans
Slough’s 2018-19 accounts remain open almost two years after the July 31, 2019 legal deadline, with “questions coming back to things not going well” throughout the pandemic.
Then, in March of this year, an internal audit began to uncover problems with Slough’s accounting practices, including the way in which profits and the minimum income provision – the annual amounts boards must set aside to repay them. loans – have been processed. Slough’s Section 114 notice says his MRP had been ‘incorrectly’ calculated since 2016-2017, with borrowing increasing from £ 180million to £ 760million.
Although Ms Wragg said that MRP had been “exposed as a problem” from a budgeting perspective, the extent of the problem was only discovered in the past four weeks or so, when ” an internal review conducted by the recently appointed Section 151 officer Steven Mair. “So forensically searched things that no one – even auditors, external, internal, LGA peer reviews – had revealed.”
Ms Wragg admits the problem “has done us a disservice”, saying it arose through “the accumulation of financial practices, policies and maybe a little bit of culture.”
“We are in the process of doing an analysis to understand this. This is something that MHCLG wants to work on with us, and that we want to work on ourselves so that it doesn’t happen again.
Ms Wragg credits Mr Mair for shining the spotlight on what happened at the council. She colloquially refers to him and his finance colleagues as “Team A,” but admits that “every time Steve walks into my office I’m afraid he’s the bearer of more bad news.”
Having attended staff briefings following Section 114, she recalls faces “just falling” upon hearing the news: “They all feel so passionate about what they’re doing, people are just incredibly worried ”.
“The first question was ‘how did it happen’? The second – “how can we help correct this?” ” “, she says. “It’s Slough’s joy, this feeling that people just want to do the right thing – they just need the tools to do it.”
Slough has, however, been criticized by Communities Secretary Robert Jenrick, who recently named him among councils that have “damaged the reputation of local government and wasted millions of pounds of taxpayer money.”
Ms Wragg says it was hard to hear, but sees him as part of the “political game”.
“Comments will be conveyed without people knowing the real facts. We are a political beast… which goes with the territory.
In fact, she found it “very easy” to work with MHCLG officials, who she said supported her in their scrutiny of the board. “They probably recognize more [section 114s] arrive on the other side of the hill, and taking a stick to beat the boards is not the best route.
The path to follow
Ms Wragg questioned how some cash-strapped municipalities share certain characteristics: “demographics, municipal tax base and the size of unitary authorities”.
She says Slough and other such authorities must have acted as “catalysts for the regeneration” of their centers where the market has failed.
While these areas have traditionally leaned on Labor, she rejects any politically partisan interpretation of the situation, saying “with their most vulnerable communities, a more interventionist approach is still likely to be needed.”
In 1998, when Berkshire CC was reorganized and six new units formed, Ms Wragg was working as a junior officer in Reading and remembers much speculation about “the durability of these smaller units”.
Slough, with a population of 164,000, is not the only one to have encountered financial difficulties in recent times: last year Windsor & Maidenhead RBC, with 151,000 inhabitants, was also on the point of publishing an article 114.
But on whether the merger of some of those boards could help improve their financial woes, Wragg points out that the four Conservative administrations in Berkshire and the two Labor-led administrations “probably don’t make good bedfellows. “.
“These are very distinct areas. But sustainability needs to be looked at.
She believes struggling boards need more opportunities to sound the alarm bells sooner, saying there is “too much potential for a lack of checks and balances.”
“Internal and external audits are one thing, but someone who comes in with particular granularity allows boards to make sure certain things are happening. “
However, since the disappearance of the Audit Commission in 2015, “this is no longer the case for local communities”.
“I wouldn’t want local government to go back to this very prescriptive audit, but what’s healthy is something in between,” she says. “So you need to declare your position, open up your space and be transparent about how you run your business. “
When Ms Wragg started in Slough, the council “recognized that it was probably operating in a more 20th century way that needed to be improved.” Its main focus was a transformational program that has just ended.
“My job was to look at how we could better manage processes, change culture, digitally transform, change channels and achieve much better working relationships with our residents – and undertake a global restructuring. “
While she still thinks it was the right intention, looking back she admits that there are some things the board could have chosen to do “in a very different way.”
She also acknowledges that the transformation was a “big demand”, especially during Covid, and advises others “If you flip a big enough tanker, set expectations on how long it takes to run it.” It’s not something you can do in 12 months – be realistic, it’s a three to four year program.
Ms. Wragg expects “a lot more” of advice will follow Slough to reach financial bottom, and is determined to be open and honest in sharing her learning with the industry.
“Don’t wait for the 114 to arrive,” she said, advising authorities to plan ahead to make sure the checks and balances are in place before reaching the crisis point.
And she urges other bosses not to be afraid to “ask your Section 151 officer the right questions – just by probing where your intuition is taking you.”